Collateral Trust Bond


DEFINITION of 'Collateral Trust Bond'

A bond that is secured by a financial asset - such as stock or other bonds - that is deposited and held by a trustee for the holders of the bond.

BREAKING DOWN 'Collateral Trust Bond'

If the issuing company were to default on the debt obligation, the debt holders would receive the securities held in trust, like collateral for a loan.

For example, say Company A issues a collateral trust bond, and as collateral for the bond it includes the right to Company A shares held by a trust company. If Company A were to default on the bond payments, the bondholders would be entitled to the shares held in trust.

  1. Bond

    A debt investment in which an investor loans money to an entity ...
  2. Borrowing Base

    The amount of money a lender will loan to a company based on ...
  3. Trust Certificate

    A bond or debt investment, usually in a public corporation, that ...
  4. Issuer

    A legal entity that develops, registers and sells securities ...
  5. Collateral

    Property or other assets that a borrower offers a lender to secure ...
  6. Default

    1. The failure to promptly pay interest or principal when due. ...
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